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EDINBURGH — It has always seemed implausible that Steinhoff acting chief executive officer Danie van der Merwe was in the dark about what his predecessor Markus Jooste was up to. Jooste resigned late last year from the global retail chain grown by South African business players based in Stellenbosch. His move followed revelations that the German authorities were investigating financial irregularities. The Steinhoff share price crashed and the group has been teetering on the brink of collapse ever since. New details have emerged in a court case that Van der Merwe, central to the Steinhoff operations, was involved in a secret loan deal that ran simultaneously with one put together for Jooste by his son-in-law. The net is closing in on Steinhoff executives complicit in cooking the books. – Jackie Cameron
By Loni Prinsloo and John Bowker
Bloomberg – Steinhoff International Holdings NV said acting Chief Executive Officer Danie van der Merwe repaid a R26.4 million ($2.1-million) loan backed by company shares that he took out a week before the retailer’s stock collapsed because of an accounting scandal.
The timing of the loan raises questions about how much Van der Merwe knew about the financial malpractice that has brought the company to the brink of collapse. Acting Chairwoman Heather Sonn told investors last month that any current executive would quit if they were implicated in any wrongdoing, while Steinhoff is the subject of legal claims including a R59 billion lawsuit by former biggest shareholder Christo Wiese, who also served as chairman of the company.
Van der Merwe’s personal investment company Ruby Street Investments Pty Ltd. borrowed the funds from Investec Plc on Nov. 29, the same day that companies owned by former CEO Markus Jooste and his son-in-law Stefan Potgieter took out a R93 million loan from the same bank, according to a court filing by Investec in December. Both loans were backed by Steinhoff stock and were arranged by Potgieter.
Steinhoff reported accounting irregularities on Dec. 5, causing the shares to crash more than 80 percent in three days. Jooste quit immediately, and has since been referred by the company to an anti-corruption police unit. He hasn’t commented publicly since. Van der Merwe was Steinhoff’s chief operating officer at the time, and was made acting CEO on Dec. 19.
Van der Merwe was sued alongside Jooste and Potgieter by Johannesburg-based Investec days after the Steinhoff share collapse. The bank said that when the loans were agreed all three must have been aware of accounting concerns that led to the plunge in the share price and didn’t inform the lender, according to the court filing. The clerk of the High Court in Cape Town said she wasn’t aware of any formal responses filed in the lawsuit.
A Steinhoff spokeswoman said Van der Merwe had a private-loan arrangement with his personal bank at the end of November and has since settled the debt. It’s standard practice for lenders to accept personal assets as security for loans and the transactions have no implications for the company, she said in an emailed response to questions. Van der Merwe didn’t respond to a request for comment.
Investec has settled the matter with the relevant parties, the bank said in emailed comments, declining to comment further. Neither the lender nor Steinhoff detailed how or when Van der Merwe repaid the loan.
“I am not sure what Danie’s intention was with that money. Why take out a loan and then pay it back a few weeks later?” said David Shapiro, the deputy chairman of Sasfin Wealth in Johannesburg, who has been trading stocks in the city since 1972. “Why would Investec just loan them the money like that? One must ask what analysis was done on the company’s books before handing out money like that.”
Ruby’s loan request was the company’s first from Investec since December 2012, the lender said in the court documents. Van der Merwe joined the Steinhoff board in 1999, the year before Jooste became CEO.
Jooste’s investment company, Mayfair Holdings Pty Ltd., has been given until the end of the year by lenders to sell as much as R2.08 billion in assets ranging from real estate to racehorses to repay almost R1.6 billion of defaulted loans, according to an agreement between Mayfair and its creditors seen by Bloomberg. That includes the R93 million loan taken out on Nov. 29. The accord makes no mention of Ruby’s dealings with Investec.
S. African labor group calls on Steinhoff CEO to quit over loan
“The timing of the loan application is highly suspicious and smacks of insider trading,” Fedusa said in a statement Friday. “There is absolutely no way that Steinhoff top executives, including Van der Merwe, could not have full knowledge of what was going on, on the eve of the share collapse.”
Steinhoff said earlier that the Nov. 29 loan taken out by Van der Merwe’s personal investment company from Investec Plc had been repaid. It’s standard practice for lenders to accept personal assets as security for loans and the transactions have no implications for the company, a Steinhoff spokeswoman said.
Steinhoff reported accounting irregularities on Dec. 5, causing the shares to crash more than 80 percent in three days. Van der Merwe was promoted from chief operating officer to acting CEO on Dec. 19. Bloomberg News reported the loan earlier on Friday.